Broadstone Net Lease Marketing Challenging Array of Healthcare Assets

Broadstone Net Lease has decided to sell its clinically-oriented healthcare properties in order to focus on its industrial, retail and restaurant net lease assets. So far it has executed contracts on 37 properties for $253 million at a weighted average cash cap rate of 7.9%. In total, it has identified 75 healthcare assets to sell.

The assets identified for sale are not typically included in single tenant net lease portfolios and include clinical, surgical, and traditional medical office properties. Broadstone was frank about their challenges, noting that they generally have shorter lease durations, greater landlord responsibilities, longer potential downtime upon lease maturity, and in some cases, greater potential challenges with tenants.

“Tenant bankruptcies, hands-on property management, heavier landlord responsibilities and costs, and messaging complexity in these properties has been an unnecessary distraction from our otherwise prudent and successful capital allocations,” says CEO John Moragne.

For instance, it is currently marketing Green Valley Medical Center after the tenant failed to pay rent since October 2023 with Broadstone recognizing $26.4 million of impairment during the quarter.

The expected sale of the 37 assets represents a $0.8 million gain over the original purchase price and are expected to close this quarter.

Once Broadstone has sold these holdings, the remaining assets in its healthcare portfolio will be consumer-centric medical properties that are typically held by many publicly-traded net lease REITs. They include plasma, dialysis, and veterinary services; assets with real estate fundamentals critical to the tenant’s business and little to no regulatory risk.